AAFP Signs on to Brief Defending ACA Tax Subsidies

U.S. Supreme Court Set to Hear Challenge in March

The AAFP and other medical organizations and stakeholder groups have joined together to oppose a major challenge to the Patient Protection and Affordable Care Act (ACA) that the U.S. Supreme Court will hear in March.

The Academy signed on to an amicus curiae (friend-of-the-court) brief(www.americanbar.org) in the case, King vs. Burwell, requesting that the court rule in favor of continued federal subsidies for individuals who obtained insurance from exchanges operated by the federal government. Petitioners in the case contend that specific language used in the ACA should be interpreted to mean that individuals who live in states that chose not to create their own exchanges should not receive federal subsidies.

Respondents argue that the subsidies were meant to be applied to everyone, regardless of what state they lived in. The court is scheduled to hear oral arguments March 4.

If the court disallows the tax credits, individuals in the District of Columbia and the 16 states that set up their own exchanges would be unaffected, but the remaining 34 states would need to create a health insurance marketplace for residents to continue receiving federal subsidies.

Subsidies are a crucial component of the ACA because a large percentage of individuals could not afford coverage without them. One estimate suggested that 8 million people would drop their insurance if the tax credits were no longer available.

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The U.S. Supreme Court will hear a case next month that could overturn federal subsidies to individuals who purchased health insurance from state marketplaces managed by the federal government.

The AAFP signed on to an amicus curiae brief supporting the respondents, who argue that Congress intended to provide the subsidies regardless of who manages an insurance exchange at the state level.

AAFP President Robert Wergin, M.D., said many of his patients are receiving necessary care because federal subsidies make insurance affordable.

If the petitioners prevail, insurance for children covered by the Children's Health Insurance Program (CHIP) would also be threatened. The ACA contains a provision that allows for children covered by CHIP to obtain insurance on a state exchange if federal funding is insufficient or discontinued.

Currently, federal funding for CHIP is scheduled to expire on Sept. 30, 2015.

"Congress did not intend to condition the availability of backstop CHIP coverage and insurance tax credits on a state's administrative decisions regarding its exchange," the brief states.

The subsidies are provided to individuals who

do not receive insurance from their employer,

do not qualify for Medicaid because their income is too high and

cannot afford to buy insurance on the private market.

During the first year of ACA enrollment, 10 million people who did not have insurance obtained coverage, reducing the uninsured rate by 5.3 percent. Most enrollees received tax credits that reduced their premiums by an average of 76 percent. About 90 percent of individuals who purchased insurance on the exchanges relied on tax credits, according to the brief.

AAFP President Robert Wergin, M.D., of Milford, Neb., said he recently met with congressional lawmakers who are critical of the ACA, and he acknowledged that the law could be improved to address some concerns. Yet he emphasized the ACA contains beneficial provisions beyond the subsidies, such as lifting lifetime limits on spending, allowing children to remain on their parents' plans until they turn 26 and removing pre-existing conditions as a reason for denial of coverage.

"It will be hard for members of Congress to explain to their constituents why they voted against those provisions because they are very popular," Wergin said.

Wergin told AAFP News that some of his patients are receiving care now only because subsidies make insurance affordable. He told the story of one patient who suffers from post-polio syndrome and has severe scoliosis with muscle weakness.

John, now in his 60s, was paying $1,400 per month with a high deductible under private insurance. Wergin advised him to apply for disability insurance but John declined, often leading him to delay or go without care.

Then John purchased a policy on the state exchange that was set up by the federal government. He pays $32 per month with a $450 deductible. He is able to obtain the necessary care and continue working.

"He got an insurance policy through the exchange that changed his life," Wergin said.

Wergin practices in Nebraska, a state that chose not to set up an insurance exchange or expand Medicaid. He said subsidies helped many of his patients obtain necessary care for themselves or their children.

Another patient, Jeanine, is in her 40s and has two children who are covered by Medicaid. Jeanine struggles to support her family but earns too much to qualify for Medicaid. She does not have insurance, so Wergin advised her to sign up for coverage through the federal marketplace. If subsidies are not available through the federal exchange, she is unlikely to purchase insurance.

"She is a working mom with two kids," said Wergin. "There are many women out there in Jeanine's situation."